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Understanding The Buyer's Next Move


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Do you know the buyer's longer term strategy for the purchase of your products and services? In this whitepaper we will use a model normally hidden from salespeople to illuminate your buyer’s next …

Do you know the buyer's longer term strategy for the purchase of your products and services? In this whitepaper we will use a model normally hidden from salespeople to illuminate your buyer’s next move, and help you to shape your customer's buying strategy.

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  • 1. Retail Price: $4.99Understanding The BuyersNext MoveThe Purchasing Chessboard Model Do you know the buyers longer term strategy for the purchase of your products and services? “The chessboard is often used as In this whitepaper we will use a model normally hidden from a metaphor for salespeople to illuminate your buyers next move. It can even strategy...” help you to shape your customers buying strategy/approach.
  • 2. The Purchasing ChessboardFinding the best procurement strategy for your products and servicesis something that buyers are approaching in an increasingly scientificmanner. Nowhere is this clearer than by reference to PurchasingChessboard model.AT Kearneys Purchasing Chessboard is the ultimate in buying tools. Ithelps buyers to set their buying strategy for a chosen product, orservice category, including;  The attention it should be given.  The sourcing approach to use.  The importance of price and non-price variables.  How suppliers are to be treated.The level of sophistication of the Purchasing Chessboard goes farbeyond that of almost any other model. In fact it extends to a total64 strategies, or approaches to further organizational goals throughoptimum procurement choices. For the seller it is a complete map ofthe buyers options.The Purchasing Chessboard is a powerful tool in the hands of aprofessional buyer. It is equally powerful in the hands of asalesperson. For the seller who is familiar with the model, it offers ameans of anticipating and matching the buyers next move.Buying And The Game Of ChessThe chessboard, so often used as a metaphor for strategy, viewsprocurement in the round, seeing it is a complex strategic functiondeserving of the same degree of analysis and planning as any other.Sellers will be delighted to know its role extends well beyond thequest for lower supplier prices.P a g e |2© The ASG Group 2012
  • 3. The Chessboard recognizes that the approach of the buyer should beboth market and strategy dependent. It therefore plots the variousgoods and services to be bought on a grid with the following axes:  Supply power  Demand powerFinding out where a supplier and his, or her products fit on the matrixrequires a bit of strategic thinking. It involves Porter-likeconsiderations of strategy such as;  Switching costs  Availability of substitutes “The Purchasing  Concentration of suppliers Chessboard gives  Barriers to entry  Proprietary technology sellers up to 64  Bargaining power of buyers. potential moves.”Those familiar with the 5 Forces model and the Value Chain (populartools among strategist) will see the models approach as further proofof just how strategic procurement has become.The 4 Key Procurement StrategiesOnce products, or services are placed on the chessboard matrix thefour strategic procurement choices available to buyers are revealed: 1. Manage spend is recommended where supplier and buyer power are both low, leading to the identification of strategies such as; demand management, volume bundling, co-sourcing and mining commercial data. 2. Change the nature of demand is suggested where the balance of power is in favour of the supplier. This can, the model suggests, be achieved through; innovation, re-specification, risk management and mining technical data. 3. Leverage competition among suppliers is the recommended strategy where the buyer has the power over suppliers. TheP a g e |3© The ASG Group 2012
  • 4. model then suggests tendering and global sourcing strategies, as well as reviewing and enforcing supplier prices. 4. Seek mutual advantage with the supplier is the recommended approach where both supplier and buyer power are high. The Chessboard offers a menu of choices that include; cost partnership, integrated operations planning, value chain management and value partnership.These above descriptions are just a snapshot, with the model goingwell beyond the 4 generic strategies to get a whole lot moreprescriptive. Indeed, it offers a menu of 16 approaches for eachgeneric strategy. For example in respect of managing spend (the lowbuyer and low supplier power quadrant) the buyer can drill down tothe next level that includes a menu of such options as:  Demand reduction  Procurement outsourcing  Buying consortia  Contract management  Standardization  Supplier concentration  Spend transparency  Bundling purchases  Closed loop spend management.The Chessboard Reveals The Complexity Of BuyingThe tools, models and frameworks used by a buyer reveal a lot abouthow they buy, in particular the level of science and sophisticationapplied to the purchase decision. The Ferrari of such models is thePurchasing Chessboard by AT Kearney Consulting.The Purchasing Chessboard is similar to other portfolio models in thatit uses a grid. For example while The Kraljic Model has 4 strategies, thePurchasing Chessboard has a sum total of 64 potential moves. Thedifference between them is partly explained by the fact that almost 30years separates the two models. The complexity of the global supplyP a g e |4© The ASG Group 2012
  • 5. chain of the modern economy could only have been dreamt about byKraljic in the 1980s.The Purchasing Chessboard is a visible demonstration of thecomplexity of modern buying. It is the appliance of science andstrategy to purchasing decisions. It reveals how procurement isincreasingly; formalic, category driven and strategy led.Those buyers using the chessboard are likely to be in the top 10-15%in terms of procurement best practice. But it has even greaterpotential to distinguish salespeople using it from the rest of theircolleagues.How Can Sellers Use The Chessboard?Sellers need to help the buyer to recognize theneeds of their category and to adopt the rightstrategy for their goods and services. They alsoneed to know the range of options available tobuyers and they need to remind buyers ofthem from time to time. An understanding ofthe Purchasing Chessboard can help in thisregard.Savvy sellers can use the model to refine theirproposition or source of value based on thelevers and methods appropriate to theirquadrant on the buyers chessboard. That givessellers a menu of up to 64 strategies that theycan connect with through their proposals andpitches.One of the greatest uses of the tool for sellers isthat it puts price negotiation in its proper context.It highlights 64 ways for the buyer to achieve what he wants and themajority of them have nothing to do with price. It encourages buyersto focus not just on the obvious (sometimes dumb) strategies ofpitting suppliers against each other, or endlessly re-negotiating price.P a g e |5© The ASG Group 2012
  • 6. The Science Behind This PaperThese insights and tools are based on:1. Buyer Research – our ground-breaking research into how modern buying decisions are made and the implications for sellers.2. Best Practice Research – Over 1 million pages of best practice sales case studies, books and research.3. Common Practice Research – Our peer comparison benchmark of 1,000s of your competitors and peers.The Sales Engine® and SellerNav are trademarks of The ASG Group.The entire contents of this document are copyright of The ASG Group and cannot bereproduced in any format without written permission.Want help in tackling your sales challenges? Contactenquiries@theASGgroup.comwww.theASGgroup.comP a g e |6© The ASG Group 2012